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Medallion Bubble Bursts: Taxi Protest Down and a US Price Collapse

If you are in the taxi driving business and paid a lot of money for a medallion or license, sell it while you still can, if you still can.

In Melbourne Australia, Taxi Reform and reduced costs of licenses have some drivers worried they will lose everything.

Sandy Spanos is only 58, but now she could lose her house and be unable to pay for treatment for her cancer, which she was diagnosed with two years ago because the reform will leave her and her husband in hundreds of thousands of dollars of debt.
Mrs. Spanos invested in three taxi licenses so she could enter retirement comfortably with a good superannuation, but she said it has all been ripped from her.

“What did I do wrong?” She asked news.com.au.

The Victorian government wants to deregulate the taxi industry by abolishing taxi licenses and introducing a single registration for taxis, hire cars and ride-share services like Uber.

Taxi licenses cost cabbies $500,000 and it’s seen as an investment that will later help fund retirement.

The government now wants to buy back these licenses and has proposed to compensate taxi license holders by paying $100,000 for their first license and $50,000 for up to three others. Mrs. Spanos has three licenses, meaning she would receive $200,000, but she still has a loan of $300,000 she needs to pay back to the bank.
Her husband drives taxis but she said he was losing income.

“I can’t pay the bank back. I’ve still got bank loans and my husband’s income has almost decimated and my assets are being seized and I’m going to lose my house,” she said.

The Victorian government has previously said introducing new licensing requirements would put passengers first and create a level playing field for all industry participants.

“This will drive greater consumer choice, better service, and will place downward pressure on fares,” the government said.
The government claims it will be cheaper to now operate a taxi or hire car as the annual licence fee of $23,000 will be axed.

“What did I do wrong?”

You paid $500,000 for each of three licenses

You put all of your money in one basket

You failed to assess Uber and other possibilities

You borrowed money for a business that one should have seen issues with a long time ago.

Investing in taxis now is like investing in the film printing business 15 years ago, just as digital was about to replace film.

Mayor Rahm Emanuel said the emergence of the ride-share industry has been a net benefit for the city.

“They provide jobs to people that didn’t have a chance to have jobs before, and they provide service to neighborhoods that never had service before,” Emanuel said. “We all know that the taxi industry never serviced the South and West Sides before. Not only does rideshare serve the South and West Sides, they’re opening offices there.”

But he says he will support efforts to level the playing field between the older taxi companies and newer ride-share operators.

The value of a medallion is now $40,000 if you can find a buyer. There will likely be a buyback proposal. Perhaps it will be very similar to the one in Australia.

The medallion crash is providing an abject lesson in the folly of central planning. Thanks to this artificial scarcity created by the government, in 2013 all taxi medallions and related assets were worth $2.5 billion in Chicago and $16.6 billion in New York City, according to Medallion Financial, a publicly traded company that specializes in financing taxi medallions. (Tellingly, its CEO, Andrew Murstein, once called taxis “little cash cows.”)

Now those cash cows are getting gored by Uber and Lyft. Uber estimates it now has nearly 35,000 monthly drivers in Chicago, almost triple the number of active taxi chauffeur licenses in the city. In Manhattan’s core, Uber gained 3.82 million pickups, while yellow taxis lost 3.83 million rides. Uber also expanded its pickups in the outer boroughs, leading to dramatic service increases in Brooklyn and Queens.

Increased competition is even benefiting those who continue to hail cabs. Research presented at the American Economic Association found that ride-hailing has “encouraged taxis to improve their own service in response to the new competition.”

Amid this freer marketplace, the taxi industry is facing serious disruptions. Last year, the average price for a medallion in Chicago was less than $230,000, a drop of 30 percent from the previous year. Several medallions went for as low as $150,000. Boston saw the average price for its medallions fall by 40 percent last year. In New York City, an individual taxi medallion once surpassed $1 million in 2014. But by March, medallion value had plunged 45 percent, as Medallion Financial revealed in SEC filings.

But many in the taxi industry refuse to adapt and instead have filed lawsuit to defend what remains of their cartel. After losing in New York state court, two associations that say they represent roughly 4,000 medallion owners sued New York City and its Taxi and Limousine Commission in federal court. The taxi lobby in Miami-Dade County, Fla. even filed a class-action lawsuit seeking $1 billion in damages for “significantly devalued” medallions in May.

In Chicago, the Illinois Transportation Trade Association, a group composed almost entirely of medallion owners and corporate affiliates, took the city to court, demanding “just compensation” for lost medallion value under the Fifth Amendment — the same constitutional provision intended to recompense property owners affected by eminent domain.

Competition is not theft. On behalf of rideshare drivers, the Institute for Justice, a public interest law firm, intervened in the case. Last September, a federal court dismissed the Association’s taking claim, though that ruling was appealed in May.

It’s hard to fathom a license going for $1 million in 2014. Mercy.

This is only the initial wave of the disruption. The drivers will vanish as well.

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28 thoughts on “Medallion Bubble Bursts: Taxi Protest Down and a US Price Collapse”

By knowingly and willingly placing yourself in a position to profit by cheering on the totalitarian scumbags to rob and gore others on your behalf, you deserve exactly not one lick of sympathy, regardless of how great the horrors that may befall you if your little scheme to blindly support theft from your neighbors fail.

Betting on film 15 years ago could have been an honest mistake. Cheering on the jackboot army to continue to rob others, is no better than cheering on them to keep the slave rackets alive, just so you don’t lose money on your investment in niggers.

On a more general note, the idiocy that government has some sort of duty, or right, to protect property “values” is one of the most disgusting fallouts of the banksterization, legalification and financialization plagues that have infected the West, since Nixon sacrificed what was once America, to those bands of undifferentiated scumbags.

In civilized societies, government _may_ give you a hand in protecting your cellphone from being stolen. As in physically ripped from your hand and not handed back.

But only in dystopian dumps where bankster collateral and the protection of the privilege of already wealthy insiders trump everything else, do they stoop to “protecting” it’s made up “value,” by banning others from building or buying their own phone.

Simply in order to to ensure the captive peons, who aren’t deemed sufficiently privileged to own one themselves already, will then have to toil away in indentured servitude in order to pay you usury rents to borrow yours. Hence “pjotecting yor poppeti vaijue,” as the idiot choir have been told to chant, while clenching their fists and stomping their boots at totalitarian revivalist meetings.

Saving a non-performing asset (a house which is subject to property taxes) you can’t afford is bad financial advice. If they own it outright they should sell it and seriously downsize – if they owe money on it they should sell before they get even more desperate. The only thing worse than cancer is government.

Look on the bright-side, Sandy: if you and your fellow cabbies are ‘hurting’ right now, it’ll have nothing on the millions of Aussie buyers of criminally over-priced real estate who’ve been lured into one of the most egregious ‘guaranteed-riches-in-retirement schemes’ the world has ever seen.

I think the worst abuse is where catv gets monopoly by horsetrading with municipality and gets exclusive franchise in exchange for a few worthless public access channels that nobody watches anyway in exchange for hugely valuable monopoly. (hard to believe local pols aren’t getting something on the side for creating so much value for catv owners in exchange for virtually nothing!)

This is presumably only happening because the politicians cream off more with the new system, which presumably involves more rides, more taxes & charges (or other things going on that are not revealed) than with the old one, which had astronomical prices per medallion but for fewer drivers.

“1968: Lloyd’s underwriter, and later member of the Asbestos Working Party, Charles Skey visited New York to investigate the asbestos situation.

: Insurance industry analysts began to realise that asbestosis claims would lead to massive insurance industry losses.

American insurers started to reserve for asbestos, pollution and health hazard claims, for which they paid out $540 billion between 1970 and 1995. They will pay a further $90 billion by 2004.

The members of the Lloyd’s ruling Committee realised that they and the 6,000 wealthy British names may face financial ruin. The report from the resulting Cromer Commission investigation recommended that the assets, which each Name must show to back Lloyd’s membership, be decreased. This would allow easier recruitment of new Names and capital. Hence there would be more assets to absorb the impending losses, and existing Names could leave – a Ponzi scheme.

Lloyd’s suppressed the Cromer report until well into the 1980’s, and has never issued it to Names.”

As George Carlin says “It’s a big club and you ain’t in it.”
If the invite you for dinner – you are dinner.

The medallion system in Boston has always been a rip-off for consumers. Only certain medallions could pick up at Logan Airport and their rates were five times the going taxi rate. Good bye and good riddance.

Chicago will just put the cost of a buy-back on “the tab”, i.e. municipal bonds. And who in their right-mind would buy an IL municipal bond? Well, their mind is not “right”, but it’s IL tax payers / savers who are attempting to avoid IL’s outrageous income taxes. The joke wil be on them when IL municipal bonds default.

This is just another variation of identity politics. In the last 50 years the individual has been placed above the good of the whole. Politicians seek only power at all costs. A politician would rather be the captain on a sinking cruise ship than the engineer on a spaceship.

A taxi medallion system should only charge for the cost of regulating taxis in the public interest and require renewal every year or two as the cars age and become less safe.

Buy granting medallions for $500,000AUD for life this was not done, rather a government restraint on trade was imposed. By allowing the medallion holders to sell these medallions to others demonstrates that it had nothing to do with the public interest.

The buyers of these medallions were in effect paying a BRIBE and deserve no compensation for having participated in this immoral system.

Should we allow medical doctors to freely sell their medical licenses? Of course not.

The lesson to be learned from this is: don’t invest your resources, of whatever type, into an industry dependent on government protection unless you’re prepared for a sudden change. That goes for all licensed professions including doctors.

Although I am against over regulation I like my doctors to be licensed thank-you. Even then we have had surgeons removing the wrong leg and facial ‘uplifts’ that were anything but. What I do like is that you should be able to do it to yourself if you want to 🙂

“Although I am against over regulation I like my doctors to be licensed thank-you.”

A license is not guarantee of safety, saruna. Quite the opposite. On more than one occasion, I have been harmed by licensed doctors including a severe Posterior Vitreous Detachment that has permanently damaged the macula of my eye and also renders me susceptible to a detached retina.

Furthermore, I know a lady who had 20 years experience as a licensed pathologist – in Australia. She married a friend of mine and moved here. However, she won’t be practicing medicine in the US because she doesn’t have a license and it would not be economically beneficial. So she is working in the medical industry in a different capacity.

And there are many medical procedures that should not require a license. And there is no reason why birth control pills should not be available over-the-counter.

Unfortunately the various levels of Australian governance will not learn any lessons as we are over governed and up to they neck in do-gooder nannycrat regulations as far as the eye can see. These days even voluntary organisations and fund raising efforts like public displays shiver in dread of Insurance costs and claims and drown in regulation.
It suits the divisive political attention grabbers to scare people with all sorts of bogyman (usually ‘man’) dangers so that few let their children walk to school, picking up someone in a car is Armageddon, wiring up a power point is death and even turning on a tap is doubtful.

Uber has rich pickings and will become a monopoly just like the taxi extortions before them.

The taxi industry will definitely see some changes, but it is hardly doomed.And, no, the drivers will not disappear. Several reasons.
1). Increased competition from Uber & Lyft will lead to less regulation, and an elimination of the medallion system, which will lead to greater competition and higher quality of service in the taxi industry.
2). Uber has no road supervisors. This is a key component of a quality taxi company, and it keeps the riff-raff out of the driver’s seat of the cabs. Yes, there are a lot of unsavory taxi companies out there, and yes there are quite a few that do not police their drivers. However, this will become a thing of the past as the forces of competition grow stronger.
3). Uber has mostly owner ops. And the few multicar owners are not Uber employees. There is a reason that cab companies will not let just anyone be an owner operator, and that is that the cab companies want to be sure the driver is a quality hire before they put the company logo on an owner’s cab.
4). Not everyone has or wants a smart phone. Uber requires one.
5). Not everyone has a credit card. Uber requires one.
6). Some people value their privacy. Uber tracks every car on every call & keeps records. Cab companies do not.
7). Insurance companies and medical establishments do not trust Uber, and therefore will trust their patients with taxis instead.
8). Uber treats the drivers like dirt. Quality cab companies do not.
9). Uber pays far below the market rate, and the drivers bear this cost. Some think they are making money, until their car breaks down. Others see which side their bread is buttered, and leave a lot quicker. Uber, like most cab companies that only compete based upon price, will see their quality drivers evaporate, leaving them with only derelicts & addicts. This will, eventually, bring their company to its knees.
I could probably come up with a dozen more reasons. Taxis are not going away any time soon. But Uber has shaken the status quo. Now the cab companies are going to have to compete. But compete they will.

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